Monday, July 11, 2005
Updated: July 14, 5:34 PM ET
Winners and losers in the NHL agreement
By Jim Kelley
Special to ESPN.com
After years of verbal infighting, a lost season and a seemingly endless round of negotiations, the National Hockey League and the NHL Players Association have come to terms on a new labor agreement.
The NHL shut down for 301 days, almost tripling its previous record (103 days, set during the 1994-95 lockout). The shutdown caused the cancellation of the entire 2004-05 regular season, playoffs and the Stanley Cup finals, all firsts in the history of the sport.
Although the collective bargaining agreement is hardly ground-breaking in relation to other professional sports, it has all the trappings of an epic contract between the two sides, one that -- also for the first time in the history of the sport -- provides for a leaguewide salary cap. It also has increased revenue sharing, created a totally revamped salary arbitration process, put even more restrictive clamps on entry-level salaries and cleared the way for a risk-reward partnership between the players and the league.
It did not come easily and likely will not make for labor peace between the two sides, at least in the immediate future.
What follows is a look at the expected principal components of the new deal in relation to the old CBA as well as an assessment of who won and how it might all turn out.
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• Old CBA: No cap of any kind, and this is the issue on which the players initially vowed never to accept a compromise. The old system was a free-market affair.
Owners' stance: This is the reason they locked down and lost a season's worth of revenue. The owners wanted a system that would control the outlandish spending they created. They got it, but might have substantially damaged the business in the process.
Players' stance: Initially, they felt a cap system was economic death, but the players capitulated at first, seemingly, to counter management's attempt to declare an impasse, later as a form of surrender to get back to playing hockey.
The deal: Salaries will be capped at a team-by-team level between $37 million and $39.5 million U.S. and a likely floor between $22 million and $24.5 million, with players overall getting 54 percent of league revenues via a complex formula that took months to establish and contains numerous auditing checks. The cap is based on estimated revenue of $1.7 billion to $1.8 billion, down from a reported $2.1 billion in the last season of play. No player will get more than 20 percent of a team's revenue in a single season. Players also agreed to roll back salaries 24 percent from their last-played season.
Winner: Under the terms of the agreement and the revenue projections, the team-by-team cap is likely to come in at about $39 million. There will be near-universal condemnation of the National Hockey League Players Association for that, as it would appear the owners got almost everything they asked for and the players did worse than if they had settled earlier in the process. In the immediate sense, they did lose a lot, but over the length of the deal and beyond, the players likely will do very well.
Fifty-four percent of a $1.7 billion-plus pie is not mincemeat, and should project to more than the oft-reported $42.5 million that was rumored to be on the table in February (though often reported, this figure was never in a formal offer and would have been rejected by the players anyway because the deal had a ceiling but no floor). Besides, if the game comes back, and eventually grows, the players will make even more. They gave up a lot in terms of the past, but the economics of the game were a problem and NHLPA leaders knew it was time for a market correction. How they went about it is open to debate, but over time, the players will still make princely sums. For example, 20 percent of a $37 million pie would translate to $7.4 million for the team's star player, should management choose to operate that way. Short-term win for owners, but a wash in the long term.
Old CBA: The owners shared some paltry television revenues and had a few joint marketing arrangements among themselves and a few between themselves and the players. However, the players had ownership of their images and likenesses.
Owners' stance: Never much for sharing, the NHL owners operated more like 30 individual fiefdoms rather than a unified business. The owners foolishly gave away the rights to the players' images in a previous negotiation, severely hampering marketing initiatives and limiting the total revenue pool.
Players' stance: Grabbing the rights to their own images, the players used them to create a revenue stream that aided player causes and helped fund a deep strike-lockout pool that enabled players to get from $5,000 to $10,000 per month during the lockout.
The deal: The players keep their images, but the teams get some marketing rights. The top 10 teams in revenue will share with the bottom 10 teams, but a source told ESPN.com that the revenue pot will pale in comparison with those of the NFL, NBA and Major League Baseball.
Winner: Small-market teams will get a new revenue stream, but the source told ESPN.com that the total will be just 5 percent of a predetermined formula. This is still an arguing point among owners, with some dragging their heels and insisting that a formula is in place that shows need, and not just a desire to cash in.
Salary arbitration system
Old CBA: Only players could opt for arbitration. The decision of the arbitrator could be anywhere between what the player asked for and what the club proposed. All decisions were final.
Owners' stance: Teams had no control over who files and what other clubs pay players with similar stats, giving the players a great advantage. Owners could walk away from an award once or twice in a three-year span, but few did because of a perceived pressure from fans to "spend to win." Teams couldn't take players to arbitration following a bad season or bad seasons.
Players' stance: Published salaries allowed players to use comparables ("He makes this and gets this; I did as well or better, so I should get at least his amount if not more"). This was the single biggest tool used by the NHLPA to drive up salaries.
The deal: Last-minute drop of baseball style arbitration as the two sides agreed the cap will help keep a limit on the arbitration, so it goes back to a range anywhere between the two offers that the arbitrator likes.
Winner: This can be a win for the players.
Old CBA: Rookie salaries were set to a sliding scale over the length of the previous agreement. Rookies drafted in 1995 were set at $850,000; in 2000, the figure went to $1,075,000, and it topped out there. Each first-year player had to sign a three-year deal.
Owners' stance: They lost early and often on this one as agents soon figured their way around the entry-level cap by demanding huge and easily makable bonuses that drove up salaries for untested players and caused veteran players to argue they should make at least what rookies got and then some. The system sometimes caused good, young players to be buried in the minors as teams opted to control costs in the early years. Other times, highly touted (and highly paid) draft picks were rushed into play to justify outlays.
Players' stance: Used the bonus structure to subvert the cap system completely, thereby raising the bar for all young players and even for third- and fourth-line veterans. Rookies often made millions without having to justify their salaries in regard to their production. Vets cashed in at the negotiating table and in the arbitration process.
The deal: The owners get an $850,000 hard cap on entry-level salaries, with bonus money, if any, generally tied to team -- not individual -- success.
Winner: Owners, hands-down. They get to control cost, but they're likely to lose many star players to competing European leagues, especially in Russia, Sweden, Finland and perhaps the Czech Republic.
Old CBA: The complicated system was based on years as a pro or years in the NHL, with groupings from 1 to 5 based on time or salary. Unrestricted free agency came at 31 or if a player was making below the league average after 10 years, the Group 5 designation.
Owners' stance: Comfortable with the age, owners were wary of the the impact on negotiation in contract talks before the age of free agency as players either looked for limited deals to become free or sought extended deals at very high pay to compensate for forgoing the free-agent market.
Players' stance: The system was as a useful bargaining tool anywhere from age 26 on.
The deal: Remains at 31 for the upcoming season, then 29 in 2006 and 28 in 2007. In 2008 it drops to 27 or seven years as a professional.
Winner: The owners won't be hurt by this, but the players get a bit of a win in that they can control their own destiny at a very young age over the length of this deal, but that will be largely in regard to where they would like to play, not how much they can earn on the free-agent market.
Old CBA: Annually, a dull affair.
Owners' stance: It's a great time to entertain clients or take a five-day vacation from hockey, and a great cash cow for the team that hosts the affair.
Players' stance: Many would prefer to get the recognition but skip the game and get the time off their non-All-Star mates got during the break. The goal was to get in and out of the host city as soon as possible and not get hurt.
The deal: It's a given that the league will return to the All-Star format in non-Olympic years, but this marks the third time in as many Olympics that the NHL has participated in the Games, likely solidifying the use of NHL players for many Olympics to come. The owners threw the players a bone by agreeing to shut down -- and cancel All-Star Weekend -- for an extended time to allow player participation in the Olympics. Players gladly took it -- playing for a gold medal is a great deal more enjoyable than playing a meaningless exhibition game.
Winner: Corporate sponsors and fans in the host city take a hit, but in reality both sides gain from the Olympic exposure. A wash.
Jim Kelley is an award-winning hockey writer based in Buffalo, N.Y., and a frequent contributor to ESPN.com.